How it works
The net stable funding ratio (NSFR) is the structural, longer-term counterpart to the liquidity coverage ratio. It compares the amount of stable funding a bank actually has (available stable funding) against the amount its asset and off-balance-sheet profile requires (required stable funding), over a one-year horizon. The ratio must be at least 100%.
Available stable funding is calculated by weighting a bank's capital and liabilities by how reliably they remain in place: own funds and long-dated liabilities count fully, stable retail deposits count heavily, and short-term wholesale funding counts little or not at all. Required stable funding weights assets by how illiquid or long-dated they are: cash and short-term claims require little stable funding, while long-term loans and encumbered or illiquid assets require a great deal. By forcing long-term and illiquid assets to be matched with durable funding, the NSFR curbs excessive reliance on short-term wholesale markets to fund long-term positions.
Legal basis
The NSFR was introduced into EU law by CRR II (Regulation (EU) 2019/876), which inserted a dedicated stable funding regime into the CRR at Arts. 428b–428az. Those provisions set the 100% requirement, define the available and required stable funding factors, and specify reporting. Like the LCR, the NSFR is assessed within the liquidity dimension of the SREP.
Relationship to the LCR
The NSFR and the liquidity coverage ratio (LCR) are complementary. The LCR guarantees survival across a 30-day acute stress; the NSFR ensures the balance sheet is not built on a fragile funding structure over the year ahead. A bank can meet the LCR through a large short-term liquidity buffer while still running an unstable funding model that the NSFR is designed to catch. Supervisors therefore treat the two as a pair rather than substitutes.
Relevance for resolution
A sound structural funding profile improves resolvability. Banks that fund long-term assets with flighty short-term money are more prone to sudden liquidity crises that can push them into failing or likely to fail before capital tools can be deployed in an orderly way. A robust NSFR reduces that fragility and supports liquidity in resolution, because a firm with durable funding is less likely to face immediate refinancing cliffs during the stabilisation period. For analysts, the NSFR is the metric that reveals whether a bank's apparent liquidity strength rests on a stable foundation or on funding that could evaporate exactly when resolution planning assumes the firm must hold together.